Role of Specialist Finance in the 2022 remortgage boom
By Andrew Ferguson, Buy-to-Let Managing Director, West One Loans
2022 presents an unmissable opportunity for brokers, as a significant number of existing residential and buy-to-let clients reach the end of their current mortgage deal in the next few months. Data from Statista shows there will be anestimated £98 billion of residential and buy-to-let remortgages in 2022.
According to research company CICA 2022 is forecast to be "one of the biggest product maturity years for a long time".
In 2017 new underwriting standards were introduced by the Prudential Regulation Authority (PRA) drawing a greater attraction to five-year fixed-rate lending in the buy-to-let market. As a result, there was a significant increase in the number of mortgages taken out over that term. As these five-year fixed-term mortgages begin to come to an end brokers have an opportunity to support their clients and generate additional business.
Rate rises help drive remortgages
Fears of further base rate rises from the Bank of England could also drive borrowers to remortgage, as they rush to lock in currently available low rates. In November 2021, the approvals for remortgages, with new lenders alone, rose to 44,500, the highest number since before the pandemic according to Bank of England data.
Amongst those looking to remortgage, there will be a number that will require a specialist lender that will meet their complex needs.
Here we look at two types of buy-to-let borrowers that specialist lenders, like West One, are best placed to help.
With demand remaining high and rental prices continuing to rise many landlords are looking to expand their portfolio. For a number of high street lenders portfolio landlords can be an uncomfortable risk.
This means finding a lender that can offer suitable interest cover ratio to maximise the amount of potential borrowing without heavy underwriting on the background portfolio can be a challenge. A specialist lender is more likely to take a pragmatic approach to the risk.
West One's approach to background portfolios is simple. There is no formal stress test on background portfolios, the property simply needs to be self-financing. No additional verification like E-Tech or EDM are required and there is no cap on the size of the portfolio. We can consider portfolio exposure limit of up to £10m.
Since the 2017 PRA changes the finances of millions of borrowers have been impacted by the pandemic and ensuing lockdowns. While most high street lenders will make an automated decision using your credit score, a specialist lender will have more products available for borrowers with a blip in their credit history.
When working with a client with a credit issue, brokers need to work with a lender that doesn't just use a credit score. SOme lenders, like West One, underwrite based on a credit assessment and each case is assessed individually on its merits, therefore some credit blips can be overcome.
A good example of the importance of working with specialist lenders was a case which the West One team worked on recently. The client had a portfolio of four buy-to-let properties and was looking to remortgage one of these to raise funds for the purchase of an additional rental property. The borrower had some minor credit blips within the last 15 months and this coupled with his portfolio landlord status meant that he was unable to access the normal high street lenders.
As a result of West One’s broad product range and ability to manually underwrite cases, we were able to accommodate the client’s credit profile.
By taking a pragmatic approach West One was able to find a suitable product for the client despite their recent credit blip and successfully remortgage the client’s property.
With plenty of other borrowers looking to remortgage in the coming months, specialist lenders are ideally placed to support brokers on the more complex cases.